five year window on multiple conversions
Quick question: Gentleman over age 59.5 converts traditional IRA dollars to Roth IRA in 2009. Does subsequent conversions from traditional IRA to that same Roth IRA in 2012 and 2013. For the growth of the subsequent conversions to be tax-free is the five year window started at each conversion or from the initial conversion?
Thanks in advance,
Permalink Submitted by Alan - IRA critic on Wed, 2015-11-18 23:00
At the intial conversion. Earnings in a Roth IRA become tax free when the Roth becomes qualified. This occurs when 5 years have passed from the year of the first Roth contribution of any type (Regular or conversion) AND taxpayer reaches 59.5. If the 2009 conversion was the first contribution to a Roth IRA, since taxpayer is already 59.5, the Roth became qualified on 1/1/2014. The entire Roth balance therefore became fully tax free on that date.